2025: will Trump bring us a new golden age or a tariff war?
Hungarian economic prospects, the expected development of the forint exchange rate, and investment opportunities will be discussed at our December event, where experts will explain the possible economic effects of Donald Trump’s return.
After the forint weakened in the evening hours on Wednesday, losing almost 3 units against the euro within the day, the Hungarian currency is unable to show strength today either. Although the forint started at 412.3 at dawn on Wednesday, the exchange rate was again above 413 after seven o’clock in the morning.
A Bloomberg writes about it in his analysisthat tthe same day, the forint weakened to a new low of 413.2 forints/euro, which means an exchange rate not seen since December 2022. According to the news agency, the main reason for the uncertainty is that
Prime Minister Viktor Orbán has not yet named the new central bank governor who will replace György Matolcsy.
They write that analysts fear that the growing influence of the government on the MNB’s monetary policy could lead to rapid and drastic interest rate cuts, even if the inflation outlook would not justify it. Among the possible candidates, Minister of Finance Mihály Varga and Minister of Economic Development Márton Nagy are mentioned. In the case of Varga’s appointment, the separate finance ministry would be abolished, and Nagy would receive an expanded government portfolio.
Márton Nagy, who was previously the vice president of the MNB, repeatedly openly criticized Matolcsy and the interest rate policy of the institution, which further strengthens investors’ concerns.
Despite the weakening of the forint, some analysts see a tactical buying opportunity in the oversold currency. According to JPMorgan experts, Hungarian bonds offer a higher real yield than regional competitors, and the country’s balance of payments is also more favorable. However, the uncertainty regarding the person of the new central bank governor and the monetary policy continues to put pressure on the forint.
Another factor behind the weakening may be that on Wednesday the ruble weakened to the level of 114 against the dollar against the latest, introduced on November 21, Gazprombank, that is, the bank managing the financial operations of European gas purchases. In the end, the Russian central bank stopped foreign exchange operations in order to block the rapid devaluation.
The U.S. Treasury Department issued rule clarifications on Wednesday that make it clear
actors of the western financial system cannot make any other transfers apart from the transactions of diplomatic missions, which can make energy payments completely impossible.
Hungary, which still relies on Russian gas shipments, may find itself in a particularly difficult situation if the American side does not make concessions.
In addition to the euro, the forint is also weakening rapidly against the dollar. The exchange rate is already above 391.6, which means a loss of 1.1 units so far. This is a reversal compared to Wednesday, when the change came back from 391.5 to 390.5.
No important macro data will arrive from Hungary on Thursday: the KSH will publish October’s popular movement and tourism statistics. In the United States, there is no stock market trading or data release due to Thanksgiving, while from Europe, the Spanish and German inflation statements can be a market mover.
Front page image: An employee puts Hungarian one thousand HUF banknotes into the cash register at the Lidl Kft. in a grocery store in Vecsés on Monday, June 4, 2018. Photo credit: Akos Stiller/Bloomberg via Getty Images.
Source: www.portfolio.hu
